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Lease Option Investing

Exactly what is lease option real estate investing? A lease-option is basically a rent-to-own contract for a piece of real estate. The buyer signed an exclusive contract for the purchase of a property rights after a certain time. If the time has expired, the buyer may be one of two things: buy at the price agreed when the contract was signed, or not to buy the property and the deposit forfeited.

To simplify, let us take a look at this from a buyer's eyes.

Buyer

Why should someone with a lease option for the real estate investing? Try risk. If you are shopping for a house a few years ago (before the market went bad), but unclear whether the area would be from the recession, you can find a lease option to pay monthly "rent" and then wait until the contract expires . The next step would be to evaluate the property. As a buyer, a lease option means that you do not have to purchase the property.

So when you look at the home assessment after a few years to compare the current market value to that of the agreed purchase price. If the house is worth more than what you agreed, you and the immediate equity. But if the property declined in value, then you can deal with relationships and can only lose the monthly payments.

How about some real numbers to see how this works? You sign a lease option to buy a house for 100,000 after a 3-year contract. You have 3% of the contract, how to "good faith", and agree to pay $ 100, before the current rent (this excess in the direction of a future down payment, if the actual purchase takes place).

If the contract on your home tested. Fortunately, the house went up 10% in the last three years! Suddenly, you have exclusive rights to buy the house for 10k below the current market value! Since you already 3% and can couple that with 100/month (2400) credit for the purchase, you have a total of 5400 (5.4%) compared to the actual purchase! Now, 10% of 110,000 is 11,000 and you now have 5400 +10 k in equity with a total volume of 15,400 on the purchase of this property! So, with 3% and a bit of thrift They have a 15.4% deposit!

Yes, but if the house went down in value? For instance, in the assessment of 90,000. Normally, since the house was 10k, you would have that the loss of shoulder. But since you have a lease-option, you get to walk away from the property immediately without any further obligations. However, you will lose the deposit and the additional 100/month. In other words, you lose $ 5400. Yes, there is a loss. However, if you had bought the house for 100,000, you would be suffering a loss of 10,000 instead of 5400! This is a loss of independence, but you save almost twice as high as the loss through a lease-option.

But how does this benefit the seller?

Seller

In these bad economic times, it is very difficult to sell your property, because there are many sellers of pollution of the market and the increase in the number of unsold houses. The excessive stocks overall lower prices. Well, for some reason (personal or financial) you need to sell your property and quickly, or for the payments.

Leasing options, you can be and how.

Thanks to the financial education is available, many people want to buy a house, but do not have the credit or the full payment required to buy a house. Seriously, how many people you personally know that it is one or the other? These people are ready and willing to buy a property, but can not be a bank, in its direction. So, why a lease option for a small deposit accepted that the medium to bad credit has a strong customer base.

Okay, time for a few more real numbers, this time from the perspective of the seller. Let's say you have a house that you paid to buy 200000. Then the market fell and now is your house worth 190k. They have a 10,000-loss in conjunction with Realtor fees when you sell your house. I doubt if that sounds appealing. What about renting it to cover the payments? Adopted local rents for a 3 / 2 in your region average 1100th This would not apply to your payments approximate $ 1400. Are you screwed? No

They jump on Craig's List and offer to lease option, you are at home. "Rent to own this 205K house for as little as 6k down!" Then, the additional monthly amount that will be in the future overall downward. Note You asked for more than what the time is worth. Why? Because the purchase of the lease-purchase option based on an estimate of what the home will be worth when the contract expires.

Now take a look at the monthly premium. Of course, the rents regularly in the field is not used for payments. So let's break the payments a little. Of the 1400 $, around 200 will be used to the principle, you will get it back on sale. So the1400's really 1200th That is not too far from the1100 regular rent. Since you're doing someone a favor, by the contract, an additional 100 more should be reasonable. HOWEVER, the buyer will also pay more, as a future if they decide to buy. If the buyer does not exercise the option, then you get to the additional funds (and additional monthly payments).

This means that your monthly payment would be 1100 and a "fee" of 100 Moreover, the amount of the buyer to agree on the future payment. Suppose that additional payment 200/month on the 3-year contract. The buyer may reduce the risk of buying your home IMMEDIATELY for a paltry $ 6000 monthly payments and changes of 1400th Oh, but we are not ready. This happens only on the exact same amount you pay, and you have a real bank mortgage! Hopefully you can see how this might be attractive to potential buyers who do not have the windfall. And it is mitigated risk for all!

So, how does it really benefit you? Well, the buyer is committed to a purchase price that does not affect the current economic slowdown. The price, as if a value has never lost. In other words, you want a revaluation of 3% per year on your home so you offer a 1 years purchase price of 200,000 +3% or two years of purchase price (200k +3%) +3%. That would be 206k and 212180.

The 3% is $ 6k. But this is not the same as the deposit for the option? So, if the buyer does not buy the house after 1 year, you still get the 3%! Now, add in the extra 200 and a month you will receive additional 2400 per year! And if they buy the house? Get your 200k +3% anyway! Leasing options are a win-win situation.

Get your% regardless of market value and the buyer gets the purchase mitigated risk for the same price, while a potentially significant gain in equity!

Conclusion:

Lease option real estate investing is a Rent-to-own strategy, which is by signing a contract for exclusive privileges buyer at the end of the agreed deadline for an agreed amount. This contract can be very easy for the benefit of both the buyer and seller, and allows the sale of real estate to your question in the luminaire market price.

Lease option real estate investing should be considered by either the investor, the buyer, or both!

Author is a writer for beginner investing, passive income and stock market for beginners a blog about personal blog joint investments and the development of passive income.